Don’t fold now, Mr. Schneiderman

Our opinion: New York’s attorney general takes a hard line with banks in the mortgage scandal. Why should a deal mean no more litigation?

They are fair questions, made all the more so by the ongoing revelations about the near collapse of the American economy three years ago. What’s wrong with aggressively investigating the practices of the major banks? What’s wrong with holding them accountable for their contributions to that crisis?

Nothing we can think of, certainly.

Yet here’s New York Attorney General Eric Schneiderman, a Democrat, under fire from the unlikely quarters of a Democratic White House, for his continued opposition to a deal that would let banks off easy for their questionable practices. Mr. Schneiderman resists the terms of a proposed settlement, especially those that would make it harder to prosecute such discredited dealings as bundling loans in mortgage securities. On Tuesday, Bloomberg News reported that he was removed from the executive committee of state attorneys general working on the settlement.

Bundling mortgages, let’s not forget, was a big reason why the banks themselves had to be bailed out in 2008. Banks were allowed to sell accumulations of mortgages to Fannie Mae, where they were repackaged and sold again to individual investors. Suddenly it didn’t matter so much to banks if they were making loans to utterly unqualified borrowers. There were no consequences to speak of for the banks when those borrowers defaulted.

Now such banks as Bank of America, Citigroup, JPMorgan Chase and Wells Fargo are understandably eager to strike a deal with state prosecutors across the country that would preclude further litigation. For a relatively small cash settlement — the Justice Department and other state attorneys general have proposed $20 billion, which would mostly go toward paying for loan modifications — these banks would be able to wipe their slates clean.

Nice work, isn’t it, especially after Bank of America and Citigroup received $669 billion in loans from the Federal Reserve, far more than the public had any reason to suspect.

All told, banks and other financial institutions received about $1.2 trillion in loans from the Fed. That’s as much as homeowners across the country owe on 6.5 million delinquent and foreclosed mortgages. The banks were made whole, but not the homeowners.

To think that after all that, the Obama administration is leaning on Mr. Schneiderman and a few other holdouts to go along with a settlement that amounts to immunity from further accountability.

It’s disingenuous, meanwhile, for the Justice Department to be arguing that its motivation to settle with the Wall Street banks is all about helping the homeowners who took out those bad loans. A deal that would prevent further legal action against the banks is a disservice to all the homeowners who could be the victims of the next mortgage debacle.

There’s this possible motivation for the Obama administration, too: Wall Street banks wield great political influence, and are generous contributors to political campaigns. Perhaps the White House wants to win them over, or at least neutralize them in a presidential race that’s already under way.

That’s not Mr. Schneiderman’s problem, however. He should continue to stand up to Wall Street. Immunity from litigation should be out of the question until we know what exactly it is we’re forgiving.

7 Responses

The financial elites (both corporate & individual) who control the casino that is Wall St. are desperate to avoid legal accountability for their fraudulent actions that lead to the 2008 crises. They are using the vast funds that they have looted from the taxpayers to bribe elected officials and regulators to pervert justice. This money has clearly tainted the judgement of those advising the White House on these matters. AG Schneiderman is shining a light into a deep cesspool of corruption and graft at the highest levels of government. He needs the full support of those on Main St., whose interests he represents.

Holy mackerel. A reasonably accurate summation of the situation vis a vis Schneiderman, the Banksters, and the Obama administration… (In fact, the best summation I’ve seen yet from Corporate media). From the Times-Union, no less! Outstanding editorial. Thank you for telling it like it is.

Schniederman is standing up for the “little people” who support America.
As CJC says, we are in this economic situation because of these institutions. Furthermore, I and many others would have been able to afford a house, without ridiculously low interest rates, and be able to spend more to boost the economy if this hadn’t happened.
Of course they should be held accountable, but who cares about the little people? Not the government apparently.

The government is pushing for a settlement to protect themselves more than Wall Street banks. For at least 30 years the government put political, social and legislative pressure on banks to lower their lending standards, and even offered to buy the bad loans if the banks complied. Once the banks figured out a way to make the government happy (make subprime and Alt A loans to unqualified borrowers) and minimize their own risk (securitize and sell the bad loans to the government or other buyers) the course for disaster was laid. If they government can get banks to plead guilty and pay a nominal fine quickly, it reduces the odds people will start to look at the governments own significant role in the financial crisis.

While I’m pleased with the TU Editorial, and glad that our Attorny General is taking some action. While I’m very disgusted with the White House’s reaction as expressed. In addition, while I can’t understand why a person like Warren Buffet would bolster the position of a Bank like Bank of America with so much of his money when he tries to appear that he is interested in correcting the abysmal finantial condition of the Country and the State saying, and begging us to sign aetition asking us to tell our Government listen to Warren when he says “Tax me”. The combination tells me that there is nothing I can do. LLet them keep the ball in the air. Just more of, “and the beat goes on”.